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CNBC

Netflix and kill: Is streaming hurting movie theatres?

Cinema chains are sceptical, saying the industry rebounded last year

PUBLISHED : Thursday, 15 September, 2016, 3:14pm
UPDATED : Thursday, 15 September, 2016, 3:14pm

Having transformed how we watch TV, online streaming giants like Netflix have begun to put other parts of the entertainment industry to the test.

While online streaming providers draw consumers in with their affordability, convenience and sheer number of options, could these platforms threaten movie theatres?

Not just yet, analysts and leading chief executives say.

“Our competition is not Netflix. It’s not the internet. It is sporting events, it is bowling, it is nightclubs,” Tim Richards, CEO of leading UK movie theatre chain Vue Cinemas, says.

“We’re having a record-breaking year this year. 2014 was a disappointing year globally, and the studios just didn’t get it right and that happens. It happens typically every five or six years.”

“And everybody predicted the ultimate demise of the industry, the Netflix approach, and everything else. (But) it was bad movies, and 2015 came back, rebounded, record-breaking year in almost every market in the world,” said Richards, citing “Star Wars Episode VII” as an example.

“We are a growing, vibrant industry and we are one of the few growing channels the studios have for their products right now.”

IMAX’s CEO, Richard Gelfond echoed similar comments last October, telling CNBC that, in a way, IMAX theaters “play into the Netflix issue”, as consumers can either “chain themselves to the couch” or go out and see a blockbuster that’s delivered with up-to-date technology, great picture quality and surround-sound.

While both movie theatre executives seem unruffled by Netflix, this isn’t to say the online streaming giant isn’t gaining ground. As of July, Netflix has over 83 million members and operates in more than 190 countries worldwide; and by the end of its third quarter it expects to have around 85.5 million subscribers.

“Netflix is certainly a key issue in terms of overall consumer media consumption and how this affects leisure time and spending,” Richard Broughton, research director at Ampere Analysis says.

“(However, Ampere Analysis) conducted a piece of analysis looking at whether key Netflix releases impacted likelihood of going to the cinema on adjacent weekends and found we could show no significant effect.”

“This doesn’t necessarily mean that Netflix *isn’t* having an impact – but that the effects on cinema-going are at the very least relatively subtle.”

Boxoffice Media’s Editorial Director, Daniel Loria echoed similar comments, telling CNBC that while the home entertainment scene has “always been seen as a threat to exhibition”, it appears the theatre industry has always been able to coexist with home entertainment.

“People still need an affordable and entertaining option on a Friday night regardless of where they live,” said Loria, adding that home entertainment is “certainly not as big of a disrupting force (to cinema attendance) as it’s made out to be.”

While the movie theatre industry continues to weather the storm when it comes to issues such as video piracy and box office flops, the industry continues to work on new ways to draw in today’s consumer.

As Loria notes, there’s a “clear sign” that cinemas are adapting to ways of offering better movie experiences, with chains investing in areas like bigger screens, luxury, bars, reserved seating and new technology to ensure consumers come back for more.

“I wouldn’t say the exhibition industry is under threat, it’s proved to be resilient for over a century by being receptive to innovation and embracing technology,” says Loria.

“If anything, exhibition is undergoing the same transformation airports and sports stadiums have in recent years: offering a better experience at different price-points.”